Casino Player Clubs & Nevada’s Data Protection Requirements

MLife, Total Rewards and Grazie are just three examples of player clubs currently operated by casinos in Las Vegas. Over the past decade, these clubs have become a staple of casino operations. To the casino patron, the premise is simple: The more you play, the more benefits you earn, e.g. free merchandise or discounts on rooms, shows and food. In reality, however, these clubs are complex marketing tools that extrapolate a wealth of information from patrons, enabling casinos to maximize patrons’ play and other spending habits.

As the use and sophistication of these player clubs have grown, so has the Nevada Gaming Control Board’s interest in the storage of patron information. The board has investigated numerous incidents in which such databases have been compromised and the potential for identity information theft existed. Consequently, the board continually emphasizes to casinos the need to conduct ongoing reviews of their policies governing the storage of patron data to ensure that unauthorized persons, such as cyber criminals, do not gain access to such information.1 We will highlight a few key laws governing the safekeeping of patron information in Nevada.

Signing up for a player club card is quick and easy. Typically, the patron is asked to complete three simple steps. First, the patron is required to provide government-issued identification to prove their age and eligibility. Second, the patron must provide contact information, such as an email or mailing address. Third, the patron is required to enter a secure PIN (known only to the patron). In return for this information, the patron is issued a player club.

Using the card is just as easy. The patron is only required to insert the card into the gaming device for the duration of play. As the patron plays, he or she accumulates points that can be redeemed for rewards. The more points a patron accumulates, the greater the reward. Redemption of rewards is also simple. For example, when dining or shopping, the patron is only required to present the card to take advantage of any discounts offered by the establishment.

What patrons may not realize, however, is the wealth of data collected from them as they use the card. Among other things, the casino will know who the patrons are, their age, where they reside, what games they play, duration of play, shopping habits, food tastes and entertainment preferences. The casino uses this data to profile patrons for maximizing spend during their stay and enticing them back to the property as fast as possible through personalizing rewards, e.g., a coupon to the patron’s favorite restaurant.

Certain information collected and stored by casinos constitutes personal information (PI). PI is information that permits the identity of an individual to whom the information applies to be reasonably inferred by either direct or indirect means. PI is important because, unlike public information, PI needs to be collected, maintained and disseminated in a protected fashion. In Nevada, PI is defined as:

[A] natural person’s first name or first initial and last name in combination with any one or more of the following data elements, when the name and data elements are not encrypted:

1. Social Security number.

2. Driver’s license number or identification card number.

3. Account number, credit card number or debit card number, in combination with any required security code, access code or password that would permit access to the person’s financial account.

Security of PI is governed by Chapter 603A of the Nevada Revised Statutes. While Chapter 603A is not part of the Nevada Gaming Control Act, gaming licensees are nevertheless subject to its provisions. The reason for this is Nevada Gaming Commission Regulation 5.011, which sets forth a list of actions or omissions that the board and Nevada Gaming Commission (Commission) may determine to be unsuitable methods of operation by gaming licensees. The regulation states, in pertinent part:

The board and the commission deem any activity on the part of any licensee, his agents or employees, that is inimical to the public health, safety, morals, good order and general welfare of the people of the state of Nevada, or that would reflect or tend to reflect discredit upon the state of Nevada or the gaming industry, to be an unsuitable method of operation and shall be grounds for disciplinary action by the board and the commission in accordance with the Nevada Gaming Control Act and the regulations of the board and the commission. Without limiting the generality of the foregoing, the following acts or omissions may be determined to be unsuitable methods of operation:

(8)Failure to comply with or make provision for compliance with all federal, state and local laws and regulations pertaining to the operations of a licensed establishment including, without limiting the generality of the foregoing, payment of all license fees, withholding any payroll taxes, liquor and entertainment taxes, and antitrust and monopoly statutes.”2

Pursuant to this regulation, the commission has the authority to determine, in the exercise of its sound discretion, whether a gaming licensee has failed to comply with any federal, state or local laws or regulations.3 Accordingly, Chapter 603A sets forth obligations with respect to the use and security of PI, several of which impact casino player clubs.

To begin, any business in Nevada that maintains records that contain PI concerning customers is required to take reasonable measures to ensure the destruction of those records when the business decides that it will no longer maintain the records.4 This requirement is noteworthy for three reasons. First, the term “business” is defined as a “proprietorship, corporation, partnership, association, trust, unincorporated organization or other enterprise doing business in this state.”5 This term is expansive and clearly includes Nevada casinos. Second, unlike some jurisdictions, Nevada does not require a business to destroy PI after a certain period of time. Instead, it allows the business to subjectively determine when it no longer requires the PI. Third, the phrase “reasonable measures to ensure the destruction” is also broadly defined as:

“any method that modifies the records containing the personal information in such a way as to render the personal information contained in the records unreadable or undecipherable, including, without limitation: (1) shredding of the record containing the personal information or (2) erasing of the personal information from the records.”6

Consequently, a casino may use any means it desires to destroy PI, so long as the records become unreadable or undecipherable.

Chapter 603A also imposes several security requirements upon data collectors. The term data collector is defined as “any governmental agency, institution of higher education, corporation, financial institution or retail operator or any other type of business entity or association that, for any purpose, whether by automated collection or otherwise, handles, collects, disseminates or otherwise deals with nonpublic personal information.”7 Again, this term is expansive and unquestionably includes casinos that collect and store PI as part of their player clubs. The security requirements imposed in Chapter 603A include: (i) the maintenance of reasonable security measures, (ii) encryption of PI in transmission and on data storage devices and (iii) disclosure of security breaches impacting the PI of Nevada residents.

Specifically, a data collector that maintains records that contain PI of a resident of Nevada is required to implement and maintain reasonable security measures to protect those records from unauthorized access, acquisition, destruction, use, modification or disclosure.8 Additionally, any contract for the disclosure of PI maintained by a data collector must also include a provision requiring the person to whom the information is disclosed to implement and maintain reasonable security measures.9 Chapter 603A does not define, however, what constitutes “reasonable security measures.” Rather, security measures under this chapter are measured against a standard based on the circumstances of the data collector, the threat environment, available technology, etc. A common factor that data protectors often rely upon to ensure “reasonable security measures” is compliance with industry standards. A data protector must be mindful in this regard, however, as compliance with industry standards may not always be “reasonable,” especially if the industry is lagging in this respect.

In addition to the maintenance of reasonable security measures, Chapter 603A imposes requirements upon the encryption of PI.10 In particular, a data collector doing business in Nevada must use encryption for: (i) all electronic transfers of PI, unless transferred via facsimile, to any person outside of the secure system of the data collector and (ii) any movement of a data storage device containing PI beyond the logical or physical controls of the data collector or its data storage contractor.11

With regard to this latter requirement, most states’ PI laws consider it a security breach when a data storage device containing unencrypted PI is lost. However, Nevada goes one step further and effectively makes it a security breach to remove a data security device containing unencrypted PI from the control of the data collector. Moreover, the definition of “data storage device” is expansive and means “any device that stores information or data from any electronic or optical medium, including, but not limited to, computers, cellular telephones, magnetic tape, electronic computer drives and optical computer drives, and the medium itself.”12 This places a heavy burden on a casino to monitor its employees’ use of cell phones, laptops, thumb drives and other data storage devices that can be loaded with unencrypted PI and taken off the premises.

Finally, Chapter 603A requires that a data collector disclose any breach of the security of its system data following discovery or notification of the breach to any resident of Nevada whose unencrypted PI was, or is reasonably believed to have been, acquired by an unauthorized person.13 In such an instance, the data owner must disclose the breach in the most expedient time possible and without unreasonable delay. Notification may be made using one of the following methods:

(i) Written notification.

(ii) Electronic notification, if the notification provided is consistent with the provisions of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§ 7001 et eq.

(iii) Substitute notification, if the data collector demonstrates that the cost of providing notification would exceed $250,000, the affected class of subject persons to be notified exceeds 500,000 or the data collector does not have sufficient contact information.14

Moreover, if a data collector determines that notification is required to be given to more than 1,000 persons at any one time, the data collector shall also notify, without unreasonable delay, any consumer reporting agency that compiles and maintains files on consumers on a nationwide basis, of the time the notification is distributed and the content of the notification.15

The privacy of PI is increasingly important in today’s electronic world. As such, casino operators bear a heavy burden to protect such information collected in conjunction with their player clubs. By failing to adhere to these burdens and appreciate their societal significance, a casino can expect significant public backlash, severe fiscal consequences and the ire of the board and commission.

1 See State Gaming Control Board Industry Letter Re: Federal and State Laws Pertaining to Security Measures Required By Data Collectors And Disclosure Requirements Should Said Information Become Breached, December 15, 2010.

2 NGC Reg. 5.011(8). (Emphasis added).

3 Id.

4 Nev. Rev. Stat. § 603A.200(1).

5 Id. at § 603A.200(2)(A).

6 Id. at §603A.200(2)(B).

7 § 603A.030. (Emphasis added)

8 Id. at § 603A.210(1).

9 Id. at §603A.210(2).

10 See id. at § 603A.215(2).The definition of “encryption” is open-ended and means “the protection of data in electronic or optical form, in storage or in transit, using:

(1) An encryption technology that has been adopted by an established standards setting body, including, but not limited to, the Federal Information Processing Standards issued by the National Institute of Standards and Technology, which renders such data indecipherable in the absence of associated cryptographic keys necessary to enable decryption of such data;

(2) Appropriate management and safeguards of cryptographic keys to protect the integrity of the encryption using guidelines promulgated by an established standards setting body, including, but not limited to, the National Institute of Standards and Technology; and

(3) Any other technology or method identified by the Office of Information Security of the Division of Enterprise Information Technology Services of the Department of Administration in regulations adopted pursuant to NRS 603A.217.” § 603A.215(5)(b).

11 Id. at § 603A.215(2). Note: NRS 603A.215(1) also requires businesses that accept credit or debit cards to meet the Payment Card Industry Data Security Standard.

12 Id. at § 603A.215(5)(a).

13 Id. at § 603A.220(1). Similarly, if the data collector does not own the PI, it must notify the owner or licensee. See id. at § 603A.220(2).

14 Id. at §603A.220(4).A data collector is also deemed to be in compliance if it abides by internal policies consistent with the timing requirements of Chapter 603A or, if subject to the Gramm-Leach Bliley Act, complies with the privacy and security provisions contained therein. See § 603A.220(5).

15 Id. at § 603A.220(6).